The Cayman Islands Government has taken significant steps to advance the financial technology capabilities of the jurisdiction through proposed legislation pertaining to virtual asset service providers.
The Virtual Asset (Service Providers) Bill, 2020; the Monetary Authority (Amendment) (No.2) Bill, 2020; the Securities Investment Business (Amendment) Bill, 2020; the Mutual Funds (Amendment) (No. 2) Bill, 2020; and the Stock Exchange Company (Amendment) Bill, 2020 were gazetted on Tuesday, 28 April and will be presented by the Minister of Financial Services at the next meeting of the Legislative Assembly.
Together, the legislative framework proposes a flexible foundation which promotes the use of new technology and innovative enterprise in the jurisdiction, while complying with newly adopted international standards set by the FATF. The new regulatory framework would provide for the supervision of persons and entities facilitating virtual asset activities as a business. In the Cayman Islands, a virtual asset is defined as a digital representation of value that can be electronically traded and used for investment purposes. An example of a virtual asset is a cryptocurrency, such as Bitcoin.
'The Cayman Islands would be one of the few countries in the world to adopt such a cutting-edge framework that is in alignment with global regulatory standards, which is in keeping with the innovative nature of this Government and our financial services industry', Financial Services Minister Tara Rivers said. 'At a time where innovation is needed to support the economy given the effects of the COVID-19 pandemic on the more traditional economic pillars, this type of regulated FinTech activity will help our financial services industry attract new clients and, in turn, contribute further to Government revenue.'
The proposed framework incorporates relevant anti-money laundering, countering the financing of terrorism and counter proliferation financing (AML/CFT/CPF) recommendations adopted in 2019 by the Financial Action Task Force (FATF), and additional measures which seek to regulate certain virtual asset activities taking place in the jurisdiction. The framework also includes a regulatory sandbox meant to facilitate the adoption of innovative technology and delivery methods in financial services.
Local financial services industry stakeholders were consulted throughout the development of the legislation.
'The Ministry has practised a robust strategy of local engagement with industry and regulatory stakeholders, having carried out extensive consultations as a part of the legislative development process', Minister Rivers said.
'The legislative enhancements being put forward are designed to increase the jurisdiction's attractiveness as a domicile for virtual assets business while ensuring Cayman meets international obligations', she said.
In addition to the proposed virtual assets-related bills, four other pieces of legislation will be gazetted and later debated in the LA to enhance Cayman's AML/CFT/CPF regime as the Caribbean Financial Action Task Force (CFATF) continues its review of the jurisdiction's legislative and regulatory framework.
The Ministry anticipates Cayman's technical re-rating by the CFATF, the regional governing body for the FATF, to be announced in October; with the FATF's review and final rating to be completed shortly thereafter.
The Companies (Amendment) (No.2) Bill, 2020 and Limited Liability Companies (Amendment) (No.2) Bill, 2020 will introduce stricter administrative fines for Cayman's beneficial ownership regime, and ensure basic regulatory powers are listed on a company register and made available for public inspection.
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